what is tax

The government needs funds to run a country judiciously, so it collects taxes from the eligible general public. Therefore, taxes work asan integral part of working for any country, no matter how developed or under-developed the same is.

Further, in India, there are various types of taxes available, bifurcated on the basis of central taxes, state taxes, direct taxes, indirect taxes, government taxes, and many more. 

Different Types of Taxes

For better understanding, we have divided the different types of taxes into two major categories, i.e., Direct and Indirect Taxes. Furthermore, segregation is made on the basis of taxes being paid to the government.

Direct Tax

The definition of the term Direct Tax is very easy to understand and means an amount of tax that is directly paid to the government by the taxpayer. 

Further, the most common examples of Direct Tax are Income Tax, Securities Transaction Tax, Corporate Tax, and Capital Gain Tax.

Also, it shall be noted that from the government’s point of view, estimation of tax earning is comparatively easier as it bears a direct relation to the income and wealth of the registered taxpayers.

Indirect Tax

On the other hand, the concept of Indirect Taxes is different from Direct Taxes in terms of the procedure of collection. Indirect Taxes are those which are not directly paid to the government by the taxpayer. 

Further, it shall be noted that indirect taxes are also known as Consumption-based, as it is applied to the goods and services while they are bought and sold in the market.That means an Indirect Tax is paid by the seller of the good and services to the government. Therefore, it canbe rightly said that, in the case, of Indirect Tax, the seller, passes the respective tax on the end user, i.e., the buyer of the goods and service.

The most prominent example of Indirect Tax is GST (Goods and Service Tax), which had replaced the regime of VAT (Value Added Tax) in 2016.


In a nutshell, Tax is the amount which is paid by the citizens to the government, so that it can efficiently, effectively, and smoothly carry out the working of the country. Further, the term tax is bifurcated into two parts, one is the direct tax and the other one is the indirect tax. 

Direct Tax is directly paid to the government, whereas, in the other case, the tax taxes are paid to the government by the seller of the goods and services.

You can also Read : How to do GST Registration Online and Its Advantages

Therefore, we can say that paying tax is an integral duty of every citizen, as the amount is used for the betterment of the country itself. 

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